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May 9th Gold Trend Analysis

In last nights web update — resistance was listed at 1499-1506 in gold and the high so far is 1510.50 —– support was listed at 1477-1484 and the low so far is 1491.

London Gold Fix $1,505.00 +$17.50

Last week’s high to low slide of $114.90 in the June gold contract certainly undermined the bull’s but a quick recovery that spreads over a series of trading session’s might rebuild some confidence.

The gold market is seeing some support off ongoing Greek debt turmoil and it certainly doesn’t detract from the bull case to see the Dollar start the new trading week out a little softer. Seeing crude oil prices up over $3.00 this morning probably lends the gold market some support but after the early May washout in a host of commodity markets, rekindling the inflation vibe might take some time. USA’s Mississippi River overflow is putting up to 12% of refineries in danger as reported this morning.

News that the US Mint sold 62,000 Gold Eagle coins so far this month should rekindle some demand interes and some brokerage firms are now suggesting that investors might return to gold, after the extreme volatility in silver recently and that could be providing the gold market with a measure of its early lift today. In the end, seeing news that Greece might have to implement a new plan to resolve its debt situation, at least partially undermines the Euro as a safe haven against the dollar and that in turn might channel some fresh money toward the gold market.

The Commitments of Traders Futures and Options report as of May 3rd for Gold showed Non-Commercial traders were net long 236,503 contracts, a decrease of 1,808 contracts. The Commercial traders were net short 285,612 contracts, a decrease of 2,442 contracts. The Non-reportable traders were net long 49,109 contracts, a decrease of 633 contracts. Non-Commercial and Non-reportable combined traders held a net long position of 285,612 contracts. This represents a decrease of 2,441 contracts in the net long position held by these traders.

The Bank of Japan said that it was hard to determine when supply problems created by the effects of the Sendai earthquake would ease. A minister in the Irish government said that any adjustments with Greece’s debt rescue package should be offered to Ireland as well. The German Foreign Trade surplus for March was 15.2 billion Euros, higher than expected. A survey of UK housing prices during April was down 1.4%, a larger decline than forecasts.

Going to the gold charts:

The gold rebound so far has retraced to the 38% area of last weeks drop near the 1506 area. This is the first area of resistance this week. There is more important resistance in the 1520 area —– the 50% retrace area and a very minor resistance line on the short term.
The bounce so far today has a chart pattern that is suggestive that this is just a bounce at the moment. With the weaker short term trend still in effect this week —– we are labeling this just a bounce at the moment. The upside this weeks look limited to the 1520-1530 area — and even this 1506-1510 area should provide some resistance today. Support is the 1490-1495 area for the remainder of the day.

In summary — we are looking at this as a rebound at the moment and we think it will take some backing and filling this week to potentially retest the support established last week as the market tries to get a feel of where price will calm down at and provide support. From a trading standpoint — its probably best to stand aside until things calm down. Expect resistance at 1506-1512 and 1520-1530 this week. Bounces aside — the short term trend remains down.

by Bill Downey

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